The Central Bank (CBRT) announced new reserve requirement steps that will tighten TL liquidity in the banking system and have an upward impact on deposit rates.
The CBRT amended the mandatory reserves implementation instructions today.
Bankers said that the practice of blocking reserve requirements introduced with the amendments will tighten TL liquidity and thus have an upward impact on deposit rates.
The measures will kick in as of March 15 and continue until January 5, 2025.
Bankers tell that the CBRT’s newly introduced practice of paying interest on required reserves for short-term TL deposits will have an additional upward impact on short-term deposit rates. Though the impact is likely to be very limited.
The changes made by the CBRT with the implementation instruction are as follows:
– The CBRT decided that a portion of the TL required reserves held on average in free accounts will be held in blocked accounts.
– Banks with assets above TL 500 billion will hold 25 percent of the required reserves for TL liabilities in blocked accounts.
– Banks with assets of over TL 100 billion will hold 15 percent of the required reserves for TL liabilities in blocked accounts.
– The CBRT included deposits with a maturity of less than one month in the practice of paying interest on required reserves quarterly.
Credit cards targeted by the central bank
Despite the steps taken in the fight against inflation, the expected cooling in demand did not materialize. Hence the CBRT was expected to implement new measures to tackle strong growth in loans and credit card usage. Banks officially took the first step by introducing an installment limit on cash advances. At the same time, loan interest rates were also increased. The decisions taken did not cover installment shopping with credit cards, yet. Further regulations on credit cards are expected to come after the March 31 local elections in April.
The CBRT’s restrictions on retail loans pulled down growth in this area, but the credit card segment continued to grow rapidly. While the growth in installment loans declined to 45 percent, the growth rate in credit cards continued to hover around 140 percent.
Discussions on how to regulate credit card usage growth have been going on for the last two months. Alparslan Çakar, President of the Banks Association of Turkey, said, “There are three areas for credit card regulation: Card interest rates, number of installments and card spending limit restrictions. It may be possible to reduce these expenditures by limiting the number of installments and boosting restrictions in certain areas.”
RESTRICTION ON CASH ADVANCES
While regulations on credit cards are expected to be made after the elections, banks have already implemented some decisions. The CBRT did not give instructions to the banks for these but guided the banks rather verbally.
– The installment limit for credit card cash advances was reduced from 12 to 3 months.
– Limit rates were reduced in cash advance. Although there is no official notification from the BRSA on this issue, it is known that banks limit credit card cash advance limits up to 25 percent of the card limit.
– The maturity of interest-free loans given to first customers was reduced from 6 to 3 months.
– The annual interest rate was increased for general purpose and loan interest.
In addition, it is stated that banks have given up offering “additional installments” to the installment applications made by institutions in shopping.
It is also stated that some banks have received verbal warnings not to continue their limit increase practices against possible limit restrictions after the elections. While it is reminded that limit increases should be tied to salary declarations, it is also reported that verbal warnings were given to banks that did not comply with this.
Different options are being evaluated to control card spending growth via written regulations to be announced right after the elections, but definite steps have not been decided yet.